good morning. it's the happiest place on earth for kids and investors alike. disney shares rising as the company's quarterly results beat the street. we're going to get into them. plus, the bulls are battling back. and they're succeeding. stocks rising on a number of other positive quarterly reports. we'll talk about them. and it's all in the e-mail. internal s&p memos coming to light in the federal suit against s&p. they're delicious. and we'll go through them, as

well. it's wednesday, february 6, 2013. "squawk box" begins right now. ♪ good morning, welcome to squ "squawk box" on cnbc. becky quick is under the weather. hope you feel better. joe is off, steve leaseman here, as well. our guest this hour, yahoo! finance senior columnist steven kohey. a lot to discuss about the markets. stocks rallying to wipe out most of the previous session losses. check out the so-called ear gauge. the vix as we call it, tumbling below 14. then in the next hour, something a little different on "squawk box" this morning. we're going to be joined on set by three well-known names on wall street.

blair ephron, roger altman. and honeywell chief david cody y. these guys? all three have been sitting in on regular conference calls with the white house. they're among the leaders the obama administration is turning to for advice on everything from the deficit to taxes to the broader economy. then, after we talk to them, they're going to paint a picture for us, we're going to turn to two powerful investors for insight into what the conversation in washington means for the broader markets. cowen and company ceo jeff solomon will join us, and the bond king, bill gross. first, steve will bring us up to speed on the morning's top stories. steve? >> thank you, michelle. disney posting better than expected earnings and revenues after the bell. the company says it expects the next few quarters to be better on a stronger lineup of films and growing attendance at its theme parks. ceo bob iegory was on cnbc's "closing bell." >> you had a lot of ins and outs. basically, the trendser good. we had strong results at our domestic parks.

the bookings have been pretty solid. advertising was okay. and generally speaking, our business performed well. and our interactive media group was profitable for the quarter. that's the first time the group has been profitable since we've been breaking it out. >> shares rising on the news late yesterday. up 39 cents, 0.72%. we'll talk more about disney with barclay's analyst at 6:20 eastern, as well as other media stocks. a number of headlines on hewlett-packard in the last 12 hours or so. the "wall street journal's's" all things "d" reports h.p. is not actively studying a plan to break up the company. this opposes a report yesterday by corts. they had sent shares of h.p. higher. in other tech-related news, the nasdaq reportedly in preliminary talks to make a $5 million fine over the facebook ipo debacle. the "journal" says the fine would be in addition to $62 million at the ex--- that the exchange is offering to compensate customers for losses incurred from facebook's ipo

trades. andrew? >> thank you, steve. before stocks to watch, a quick context on the h.p. story. a lot of peep watching that stock this morning. the reason that report on cort, a new web site most have not focused on, is at that original story was written by the mergers and acquisitions reporter formally of the "wall street journal." so a lot of people took it to be gospel. then, of course, turned the whole thing around. i don't know if you still have a mic on. let's get to some of the other stocks to watch this morning. all big movers after the bell. shutterfly's q4 earnings jumping a better than expected 50%. the photo-sharing and printing web site sales, margins also improving. take two also reporting a strong 75% increase in quarterly revenue. the key catalyst in this case was a record-breaking release of a basketball game. take two also authorizing the repurchase of 7.5 million shares, that helping the stock, as well. finally, zynga shares also rising. this is probably the biggest surprise. the online gamemaker reporting a smaller net loss that beat wall

street's muted expectations. then bee got -- then we have expedia which reported a lower than quarterly profit due to higher expenses. revenue topped expectations as hotel and air travel bookings rose. and a rise of 23%, hospital i.t. vendor posting double digit gains from record bookings and air shares getting a boost as earnings beat the street. do you eat this, michelle? >> you know, we had -- >> sandwich person? >> we ordered at cnbc last night for dinner. everybody. >> all this discretionary stuff, disney -- >> i noticed that. >> expedia bookings, travels, hotels. >> then the theme park is discretionary, right, for sure. >> some people got to do it. i mean, if you're sitting there with twin 8-year-old daughters, which is not me, you are required to go. >> right. >> to disney. but otherwise like the health and human services intervenes. but beyond that, it is absolutely discretionary. the films, stuff like that, i think it's interesting. there was a little boost in

income, dick kohy is here but not introduced yet. >> he's not allowed to talk. >> i'm not allowed it talk yet? >> we'll talk at you for the moment. an income boost. we had dividends paid which is not your typical disney person. at any event, we did see a little bit more employment. >> the labor market statistics were pretty good in terms of the combination of what was actually reported for the month, plus the revisions. and if you look at the ism numbers, the ism employment numbers were also up. so we ended the year before the big tax, social security tax hike, with the labor markets at n pretty good shape. >> dick kohy, ladies and gentlemen. applause. >> economist are able to talk even without introductions. this is a very common behavior an commerce -- >> and behavior, too. >> panera's, what, middle line, not an expensive place, not the cheapest place out there. >> right. not a dollar menu but not a sit

down either. >> i'm always flabbergasted by what to think of mcdonald's. >> it means -- it's on its own. i wouldn't say -- mcdonald's, walmart, they mean something. >> mcdonald's is always the funny call. if mcdonald's does well, does that mean that people are trading down? i believe they're trading down. >> or doing well -- >> except they went up with the higher margins with some of their mccafe and stuff. chipotle did well. you saw that. >> right. >> that was less a function of the economy and more a function of the fact that they expanded their stores dramatically. >> there should be as much mexican food in the united states as possible. i just love it. >> i love chipotle. >> yeah. we'll check the markets. we'll show what's going on with the futures. we recovered a lot yesterday after the big sell-off that we saw on monday. now the futures suggesting a flat open for the s&p. the dow opening nine, the nasdaq open, call it flat. we'll show oil. it's higher by 84 -- there we go. it's lower by 61 for wti. brent at 116, n london, lower by

28 cents. the ten-year note. yielding 1.99%. a gain of .8 point. we may have to learn all that stuff if we go back to, you know, trading in fifths at the stock exchange. and then the yen at a 34-month low against the euro and also against the dollar. the head of the central bank has got to leave three weeks earlier than expected. that's leading to more expectations of faster and quantitative easing. gold at 16.69 per ounce. steve? time for the global markets report. who better than kelly evans, standing by in london. kelly? steve, good morning. i just want to pick up on what michelle said. she was talking about what's happening with the nikkei. all i want to show you today is basically forex. this base is driving so much of the return, so much of the trade across the globe. the dollar/yen, 93.66. flirting with the 94 level. we had jeffrey on from ubs saying this could go to 100 in the next couple of months' time. what is that doing for the

nikkei? up 3.8% today. a lot of people saying if you think the rally of the past quarter has been sharp, this could keep running. martin wolf from the f.t. trying to temper that saying, look, there's an onus on japan to prove that it can achieve what it set out here and what markets are starting to price in. nevertheless, 94 here potentially, a level for the dollar/yen. aussie dollar, also weakening. this for reasons that have more to do with macro weakness. down .75%. below 103 earlier. that was a big move for this currency pair which hasn't been as weak as people expected given the weakness in china over the last six months. again, signs of some weakness in australia's domestic economy. retail sales disappointing. the rabb could cut rates -- rba could cut rates. for a second, i'll go to sterling. up .1%. 156.55. you know how much people are watching, mark carney taking the helmet. the bank of england from a

policy point of view. if he doesn't deliver on the stimulative measures, taking a more dovish stand, this could really take providence. other ways, if he does, this -- otherwise, if he does, this could go to 1.50. i'm trying ton root for that given my structural long dollar position. in trade today, european stocks are generally weaker. the euro/down down to 1.3537. despite the strength in the equity session, not fully carrying through on this side of the pond. >>. >> you're rooting for kareny to take stimulative actions which would reduce the value of the pound relative to the dollar and increase your buying power and structured long tradition. >> i'm trying not to take a strong position. >> you are vested in this story in a big way. >> that's true. i don't know, how do you not be vested? i have to get paid in gold or something. >> get paid in gold. that would be the way to do it. my understanding is --

>> there are certain women who do that. >> let's leave that topic. michelle is here, ladies and gentlemen. carney might be thinking about doing things like nominal gdp targeting. that's the latest trend now. >> gosh, i've been hearing all about. that that's exciting -- >> that's the exciting television that only cnbc brings you at 6:10. this would be a -- >> a very big deal. >> kelly, do you want to comment whether or not kareny -- is there appetite in england for nominal gdp targeting? >> even if they don't call it gdp targeting, it will effectively amount to something like that. what other central banks are doing. may not be necessarily calling it, but broadening their view on what count toward their mandate. the bank of england has had a firm 2% inflation target. steve, if on thursday coincidentally when the bowe and the ecb -- boe and ecb will be meeting, if carney talk about needing more of a band, a 1% to 3% range for inflation, taking more variables into account, what he's saying is something likened gmd without have --

like end gdp without that -- >> all the policies he created were debated in the half ways in davos. in the sessions. i know you picked up on all the central bank talk. >> that's all i was picking up on. it was -- all i can think about. most of the time. >> others were picking up scotch. you were picking up essential -- >> that and the caviar. the great kelly evans, thank you for that report. let's get some more developments on what's going on in the s&p case. the government's lawsuit against standard & poor's. a new trove of emails and documents have come to light. i mentioned earlier, they're kind of delicious. i want to explain. delicious. in one december, 2006, memo, an s&p executive wrote the following -- this market is wildly -- a wildly spinning top which is going to end badly. the correspondence was made public in documents yesterday. provides a glimpse at some of the inner workings of the institution that the justice department now says fraudulently inflated credit ratings with dire consequences for the entire

economy. and dick, we were talking about this earlier. i think this is a lousy case. i've read the entire thing. i think ultimately what you're going to find is you'll find cherry-picked emails that look horrible and are -- >> hold on. and they're very late in the cycle. i mean, if they had come out in 2004, 2005 -- by 2006, they say the media hates us, why? because we were already calling them bozos for having missed it. >> i think the emails -- we are not seeing are the other side of the e-mail which is that there's this debate raging inside us if we do -- how do we change the model? what do we do? then you go and get the fed minutes as we were talking about yesterday. you say, look at the way ben bernanke was thinking it the world. >> right. they didn't exactly catch it at the fed. gramlich early was right on it. they basically ignored him. the fed had it. gramlich had it but they ignored it -- >> simpler than that. if everybody knew they were so bad, all of those people would be rich. they're not, okay? >> some of them are, by the way.

>> like five of them, by michael lewis. right. >> what do you think, mike? >> i think as a stand-alone case it's what's the point at this point. if it doesn't spin off into a bigger discussion of what is the role of credit rating agencies we'll act alarmed that the credit ratings attached to each securities pool were not perfect. they didn't have impressions embedded in them. yet the credit agencies are encoded in our securities law. with a specific role. what are we going to do here? does it make sense? >> the core of the problem, right? when you legislate an institution into profitability, when you say you have to buy their product, guess what -- their product turns out not to be very good because there's no competition. everybody's got to buy it. >> i don't know, look, you need. in fact, you need it and need it in areas just like this where the average buyer cannot actually do the work. >> i don't think this is a private versus government story. i think this is just people who missed it story. the question is, did they miss it on purpose, or did they miss it because they just missed it?

that's -- that's the issue. >> the smart conversation to have is why did the market not self regulate itself. and what was happening was -- let me finish the thought, dick. you had people accepting ratings that they knew -- there wasn't any question about this. they knew the ratings were paid for by the buyers. they understood the rating itself had a conflict of interest. so why didn't -- when you go back to the one mistake that greenspan never admitted to which is that he didn't -- he counted on the derivatives market to self-police. and he thought both sides of the transaction would structure it in such a way that a risk was accounted for. so what i want to know and what i hope we end up thinking about is, can we get this right in the way that doesn't require massive government regulation so that the market can self-regulate -- >> bill -- >> what went on there -- >> bill action man would tell you the reason the market didn't self-regular is because it's nearly impossible to short the housing market. one instance -- goldman sachs case, remember, with paulsen. they had to create the synthetic derivative to achieve that.

but it was really, really hard to do. couldn't short it early enough. >> i take the position that as much as -- as easy and as obvious as it now seems to everybody around the table -- >> if t wasn't. >> it wasn't. god bless michael lewis for finding five people who called it right. but, you know, whether there was a sixth and seventh or eighth -- >> there was sdunkz among these things -- distinction among these things. they thought they were separating a discreet group of better than average. it wasn't as though there was a blind not to anything triple a -- >> walked like a duck, talked like a duck, but got sick like a pig. >> one of the the issues was the invention of the personal computer. so -- >> i agree with that. >> you had this kind of quantitative belief that all this information that was flowing through the model was reliable. and that you could -- you could have a nice mathematical equation which would reach the conclusion. and that's a big part of the problem is i think as you went

up the chain of decisionmaking, a lot of people believe the numbers that came out of the computer and not have a human being saying, hey, this doesn't make any sense. >> right. >> worse than the computer was the spreadsheet because you could start with the answer. >> right. >> and you could change assumptions going up the line. >> great point. >> was an explanation for why we had the real estate bubble in the '80s was because it was the first time they had spreadsheets that could spit out charts. it was the first time anybody saw -- >> what about the ipo boom -- >> i think they had quill pens. >> do they have a spreadsheet for actually snips come on, there's always bubbles. >> it doesn't explain that the buyer of the product or, say, the -- the end user -- fundamentally understood that these were biased ratings. maybe there was some representation of non-biased in there. >> they were lazy. >> i just -- >> they subcontracted the risk assessment. >> what do you disagree with? >> we've got to go. i disagree with the prep is. ultimately -- premise.

ultimately you're suggesting the other side ultimately knew that they were wrong. >> you're telling pme pimlico dd not know that the ratings that were coming out was paid for by the institution? >> yes, i believe they knew that. no, they knew that piece of it. >> they ignored them, too. >> they ignored that piece. >> they used it as cover. >> why? why did they ignore it? >> because they didn't care. >> you have to -- hold on. you have to differentiate this -- there are many portfolio managers out there who never cared what the ratings agency said. they did their own risk assessment. the people who got caught were the people who were lazy and subcontracted out their risk assessment to these -- this group instead. >> why didn't they care? why were they lays? that's the question. and if we're going to fix this in a way that doesn't bring in the government and regulators to find a way to make sure the end user of the product -- no? >> i think you have a substitution of real -- for real people of p.c.s.

i think when the europeans brought this paper, what happened was that under the bassal rules they had a lower capital charge. for high rated stuff. and it came right through this -- it came -- >> government regulation induced overconsumption of a certain product? >> absolutely. >> yes. thank you. >> absolutely. >> yeah. why is it show shocking to you? >> i think what michelle said -- >> i think there's a larger story to be told. we can talk to mike and dick later about. this i'm curious about what the next step in the credit rating agency -- >> that's -- same as my question -- >> what it should ultimately be. >> how do you get a place where the end user either cares about it or you understand -- >> they must suffer the sequences, they must be punished by -- the consequences, they must be punished by that. now you ththey don't believe th credit rating. >> maybe we can get back to this. it's an interesting topic. and disney rising on news,

attention "star wars" fans. >> yay! >> bob iger making news that i promise you'll want to hear -- ♪ >> if you want to know about this music, you'll want to hear this next. and monopoly with the most significant change in decades. happening today. toymaker hasbro announcing a new lineup. fans cast ballots to propose which pieces to add and which to take away. we'll tell you which one is on the schedule a little bit later. come on, nowadays lots of people go by themselves. no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey!

♪ [ howls ] ♪

welcome back. u.s. equity futures suggest a flat open. dow opened higher by maybe seven points, making headlines, rbc says it expects to pay "significant penalties to settle regulatory probes into ribbing lie bor and other benchmash interest rates." fines at $627 million. though the bank didn't specify amounts. cftc commissioner bart chilton will join us at 8:00 eastern time to discuss. andrew, big story of the morning. >> disney beating the street with its quire results. ceo -- ceo bob iger talking about "star wars" news. >> in fact we are working on stand-alone films. larry kazden working on films derived from great "star wars" characters that are not part of the overall saga. we still plan to make "star wars" seven, eight, and nine

over a six-year period starting in 2015. there are going to be a few other films released in that period of time, too. >> does that wean we'll get a chewbacca film? i want r2-d2, but chewbacca the early years. >> let's talk about -- talk to anthony diclementy. the question is whether analysts are thinking this is all going to work out. anthony, of course, from barclays. what do you make of the news and what did you make of the interviewer? >> i thought it was good. first, can you confirm that bob is not on set live now? >> i think -- yeah. jeff bethesdas zos is here, tho. >> i think "star wars'" strategy, you look at pixar, marvel, it's taking intellectual property from other places and pushing it through the global machine that disney could really monetize content just as well as any diversified media company. and that's the problems of 2015. look a "the avengers," "iron man 3," another monster from pixar

coming up. the acquisition strategy on the film side has served bob and served his company quite well. >> anthony, i get the joke on that piece of it. then i think about espn. you see the margin compression there. the costs going up. you see what's happening to the dvd business. you have to say to yourself long term, yes, you can create new content that creates value. but the ability to monetize it at the kind of margins they've been able to historically, does that last? >> that's a great question. and insight. you think about the sports contracts and nfl rights fees escalating. that's been a big question from me and other analysts in terms of the margin. espn did beat on the margin in the quarter. however, in the december quarter, ratings were soft at espn. and that i think limited advertising upside. what disney will say and rightfully, they've renewed deals with distributors such as comcast, such as time-warner cable. at very -- attractive term. so their affiliate fee growth

was about 9% in the quarter. and they've got new details, new affiliate revenue growth that's kicking in next quarter. so -- >> anthony -- >> go ahead. >> i don't know if you read, there was a piece in "the new york times," maybe the "journal" about the idea of going a la carte. the idea that actually sports because the costs were going -- getting so out of control, they -- there might be a government mandate at some point. it could be considered -- no, it could be considered a -- some people think this could be considered the ultimate tax refund. >> must have stand alone espn. >> you could always get a representative in congress that makes a lot of noise about that. >> thank you. >> but i just don't -- i don't see it happening because the disneys of the world, wholesalers, they're always going to bundle. media has made a lot of profit and profit margin on this inefficiency and being able to bundle the really great content with the -- >> you called it inefficiency and ultimately doesn't technology -- forget about the government -- doesn't technology get in the way of that? >> technology is way ahead of the legality of it. you have to remember the rights,

the multiyear contracts that the media owners have with the distributors. that's all more -- the lawyers are operating a much -- much more slowly than technology is. so i think that, you know, unless you're ripping it off and we haven't seen piracy in -- in the live tv space really very much, that it's going to be hard. espn's not going to make its programming available outside of the traditional multichannel bundle. it's not -- they're not going to do it. >> anthony? we've got to leave it there. we thank you for waking up early this morning. >> thanks as always for having me on. >> and bob says hello. at any -- if anybody doesn't get the joke, last time we had him on, jeff bezos was here. laughing -- >> i was punk aide. >> we convince -- punk'd. >> we con anthony briefly that he was here. we had him effectively -- you weren't saying nice things. then he thought he was really here. >> wasn't personal. just -- you know, joe punk'd me. that's one for you guys. >> we'll see you soon. >> right. take care. see you soon.

>> joe is not here, however. >> right. coming up, stocks rallying so far this year. we'll ask if the dow can topple even more records this week. "squawk's" fab four weighs in. great, everybody made it. we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location.

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♪ back to "squawk box" here on cnbc. 6:30 eastern time. andrew here, but the great professor, both here. >> i'm spiriting joe. >> you're spiriting joe. that is true. are you spiriting joe this morning. our guest host this hour, yahoo! finance senior columnist michael santoli. and bny mellon chief economist dick kohy.

great to have you. thank you for sticking around. making headlines, we're still talking about dell's deal to go private this morning. a story in the "wall street journal" today says that microsoft's money was actually not necessary for the privatization to go through. but silverlake apparently wanted to be sure their private deal would have strong ties with microsoft. in an interviewer, dell cfo brian gladden says that microsoft is committed to the p.c. industry as a whole. i read the story, glad we're sharing it. i actually don't buy it for a second. i believe they needed the $2 billion. i thought the most interesting piece, i'm curious what mike thinks, is that it was structured an as true equity but as a loan. so that microsoft could turn around and say to h.p. and all of their other suppliers, guess what -- >> we don't own them. >> we don't own them. basically we're a bank. but basically, the way the loan is structured, it's the equivalent of equity? i think to pretend they didn't need the money is -- >> to pretend they don't need the money is disingenuous. i think in this environment you could have scrounged up the $2 billion.

>> they needed the $2 billion. >> right. >> the idea that they somehow didn't -- they needed it from somewhere. >> exactly right. i think that's true. i also believe from dell's perspective you want microsoft in the mix there somehow. however you structure it for microsoft's purposes, it does help to have that, you know, calling card that says at least where we're not going to be left to drift -- >> they need to finance other -- other computer makers. yes -- >> does h.p. call up and say you know what, i need catch, rather than going to bank, we want you to give us a better rate. >> microsoft is in the hardware business, too, right, with the software -- the surface thing? >> surface and things like this. >> about xbox -- >> i don't know where this is going. >> if you look at it from a different point of view, this is the result of ben bernanke's easy monetary policy. because you've created an opportunity for people to releverage. this is part of a broad theme of cheap releveraging. because enjoy the are so low, the fed's trying to get jobs to

be created. part of what's going on is you're able to take a corporate asset and other assets and re-leverage them in order to raise your financial rate of return. that's not really what the -- what the whole program was designed to do. >> do you get nervous when andrew says maybe microsoft becomes a bank? that seems much out of their core competency. >> you know, i don't think that the people in the banking industry are too petrified about that prospect. >> one issue with that -- >> i don't expect many banks to be getting into the p.c. software business. >> there's a lot to talk about. i would observe that it has to do with companies. not governments. this is a good thing -- all the discussions to have. we'll talk about a surge in stocks as the dow tries to recapture 14,000. joining us now, lou breem, investment strategist at drw trading glroup, and jeff group f kki financial. and mike and dick hoey here to

continue the conversation. lou, i was reading in your notes this morning about the outlook for the economy and jobs and the fed. what is your take? are we in a better place than we were a year ago? is being in a better place the same as being in a good place? >> as far as the fed and the economy? >> far as the economy mostly, yeah. >> you know, i think it's -- i need more information. that's the one thing that the fourth quarter gdp and the recent jobs data has made me realize is that i need more information to know. you know, we had the decline in the fourth quarter gdp of .1%. you know, can be sloughed off because it was the fiscal cliff. we can point to the personal consumption being up 2.2. but we don't know how much of that personal consumption was stolen from the first quarter because of the -- the new schedule for dividends and bonuses that were moved ahead in case there was a tax problem. >> right. >> and the other thing -- this ties in directly to the fed, the nominal gdp in the fourth quarter was 0.5%.

that's how we get to that real gdp. we take the deflator of .6 and subtract it from the nominal gdp. the nominal gdp of up .5% is the lowest gdp in a non-recession quarter in the post-war period. and so nominal gdp is the -- the proxy for aggregate demand. bernanke is buying all these assets and liquefying in order to try and move the stocks up which will then create aggregate demand and then you need hiring to fulfill that aggregate demand. and so when you get the gdp, the nominal gdp at up at half a percent, we're falling behind. >> there's not a lot of aggregate demand. i will point out a lot of that less aggregate demand was government. jeff, does it matter that the conversation that we're having has changed? michelle and i are not -- she might have been pulling my hair, but she couldn't have any success at it. we're not about government policy now. it's not it what's happening in washington, we're arguing over,

you know, disney is -- you know, the outlook for media. we're talking about, you know, the dell merger and the private deal. has the conversation changed down where you are, too? >> well, it is a great point. in the pits behind me, even the s&p pit, we are looking for something. yesterday we couldn't find what negated the losses from monday. everyone said oh, earnings this, earnings that. we personally in the pits thought it was the bank of japan undercurrent that negated returns. you're right, the linchpin of this rally has been the fed. right now, we will see the pain in spain, europe and all these other things come to fruition. right now, you're right, steve. we are ignoring a lot of things that -- >> he made the point. everybody's looking for a reason for the rally to fail. >> that's good. >> look, the reason this is a normalization of the stock market has all the nightmare fears of the meltdowns that might occur have faded. this is really -- if you look t stock market, it's perfectly

reasonable -- reasonably valued after this huge rise on a normal calculation. what happened was the chinese hard landing didn't take place -- >> didn't happen. >> the european financial total collapse didn't take place. the soaring of inflation because of the fed easing didn't take place. the tax cliff didn't -- was resolved reasonably. and the stock market did not go to 5,000. there were all these nightmares that people were afraid of. >> what do you do, add to your positions here? >> basically the way i look at it is there are five categories of monetary policy. aggressively easy, easy, neutral, tight, and aggressively restrictive. you get your bear markets when you're in restrictive and aggressively restrictive. we're in aggressively easy. it's going to take us a couple of years to get to neutral. so in that kind of a context -- >> that sounds like you buy. >> what you do with stocks is you get long and you stay long.

and you don't get lost in what was nominal gdp -- what is nominal gdp in the fourth quarter. that's not the issue. the issue is the -- the federal reserve and now the bank upon japan, as well, other central banks, are aggressively easy. that's a favorite with the environment for sustained economic growth. and a relatively favorable stock market. and that's the broader thing -- >> if we have a conversation about companies and earnings, is that an on, stri -- o strich conversation? are we ignoring big hammers coming down? or are we to the point where we should be having these conversations? >> they've normalized in the sense that all the central bank exertions, that's the context, okay. we now all agree that's the context. it's, you know, the -- the japanese are now a very forgiving margin clerk to the world, okay. they're giving the world all this money. now -- yes, it's been a very good, healthy rotational stock market. and when you have that as just context and not a matter of

suspense, what's the fed going do? we know what's going to happen. it's there in the background. i do think it's positive that we're talking about companies, trajectories, what's a fair price to pay for a given company in the business cycle. i agree. michelle, i agree that people are kind of eager to say tactically we're too far too fast. and, you know, everyone else is too bullish. we have this fun house mirror thing of everyone saying everyone else is doing something that they're not doing. now i do agree with that. but the way i interpret it is the sentiment stuff and how people profess they feel about the market has gotten ahead of position. this leakage of all that, the tension about the possible meltdowns has actually been a process that's taken longer. the central banks have smothered volatility. it makes people more willing to extend their time, take more risk. i don't know where it stops. i think tactically we have to be a little bit -- >> a lot of folks in the pits in chicago, a lot of people are nervous. i think today we are seeing equities flatten out.

so a bit across the treasury curve could implicate a down day today. >> we'll watch for that. all right. thanks, guys. >> lou and jeff. thank you very much. >> thank you. >> mike and dick are with us for the rest of the hour, andrew. >> okay. coming up, i don't know if i can say this properly -- put me in, coach, really, i want to be put in. the owner of the colorado rockies make the walk to the "squawk" mound this morning. we've got a lot of little analogies. >> i have always wanted to meet this woman. i am so excited. >> she's got a pitch on jobs, construction, the economy, and yes, spring training, when we return. it's a new day.

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welcome back to "squawk" on this wednesday morning. making headlines, pinterest is reportedly in talks for a new round of finance. the "wall street journal" saying this would value the company -- get this -- at $2.25 billion. that's following its last round of financing back in may. pinterest, by the way, back then, $1.5 billion. not bad work if you can get it. also, real quickly, fair -- excuse me -- fair market now,

virtually -- futures not looking either way. back to you, michelle. >> thank you very much. on set we have a home-grown success, american success story. she went from being the only daughter in a family of seven living in a rundown area of albuquerque, new mexico, with little to no resources. now he shuns a multimillion -- she runs a multibillion dollar construction business, the way things are going these days, becoming the first hispanic owner of a major league baseball franchise. she's here to talk baseball, help us take the pulse of the commercial market and commercial development. with us on set is linda alvarado, president and ceo of alvarado construction company. and owner of the colorado reeks. i wasn't joking, i -- rockies. i wasn't joking. i have wanted to meet you for so long. great to have you here. >> it's a pleasure. >> this is kind of a joke but not really. did beyonce cause the blackout? you own a team, deal with stadiums, and you have done work on major, major infrastructure. what happened? even you don't know the specifics, is this a reflection on the nation's infrastructure?

>> well, i wouldn't blame beyonce, for starters. but it is not only a hi high-profile event, you can imagine the media coverage. the amount of electricity that's required, as well as the halftime show. while they're still investigating, not only do they blame the contractor but, in this case, i think we need to wait and see. i think there's alternatives, and they're looking at next year make sure such a thing won't happen. >> you -- you deal with surges in electrical demand when you're working on project, right? >> absolutely. alvarado construction was the lead constructiontor of the pepsi center for of the 2008 national convention. this was high profile. either the first woman or first african-american nominee. and we converted it, and it's a sport facility. it's not a convention center, it's not set up for this. one of the things because there was so much broadcast and so much electrical, as well as fiber and data demand, is that

we worked with excel, the energy company, to make sure that not only do we have backup, we had backup upon backup because this is reflective for people saying what happened as opposed to everything going the way it is. >> good. can you imagine if that event, there would be blackout all over the world, what would they have said about american on infrastructure. it would have been horrendous. >> that's right. that's right. >> how is commercial real estate? >> well, you know, the construction industry as a whole has been dragging. residential in particular. but we see a turn now slowly in the residential market. and the cyclicality of that is commercial always follows residential. and we're seeing some uptick. you look at the american institute of architects and the associated general contractors, we're optimistic that it may not be a big spike, but maybe somewhere between 5% to 7%

increase. i think a lot of that is because the banks now are lending. and some of the projects that were delayed are not done was because of waiting for finance. >> is there an example of that? i'm -- something you could not get, a real estate developer who couldn't get a loan that now can? >> i think there's numerous ones of them. in this case we were not the developer. >> right. >> i think primarily it was commercial, office types of things. i think that obviously you know better than i do that the banks are highly liquid at this point in time. the regulatory issues hopefully are calming down. and i think that there's more confidence not just in the banks but also in the business environment that they're expanding. >> how helpful would really good immigration reform be to you in the construction business which is so dependent on immigrant labor? >> i don't think it's just construction. i think that this is an issue

all businesses are talking about. part of it is, number one, how do we get the reform done. and do it in a way that's timely. do it in a way that in principle doesn't break the rules but as a business owner, i look at that talent pool. i look at an aging demographic. and i look at potential people who need to get into college who in many cases as children had no ability to make the determination to get them -- the american dream,ing to to see college. but then be able -- dream to be able to go to college but then be able to get a job. >> are there not enough americans that want to do this work? i throw it out there. >> construction? everybody loves to do construction. >> everybody -- >> everybody loves to do construction. >> when you look at the statistics, you see a lot of illegal immigrants, mexican immigrants, eastern european immigrants working within that sector. >> i think service industries as a whole, not just construction, where we see the lack of really the competition for talent is

the actuarial aging of engineers. and the competition now for engineers, you know, they're 46 years of age. we need develop that talent pool, partnering with ace and other programs that get young people, not just sustained but to focus on s.t.e.m. engineering in particular. >> linda, lousy baseball year last year. >> i knew there would be a sports question. >> had to do this. any prospects this year? i guess a bunch of healthy players coming back. are you investing inany prospec? expecting healthy players? what are you expecting this year. >> it was challenging last year and good news is while we have a lot of injured players pitching. troy being one of them and we have a new, walt, not knew to the rockies, one of our players, taking the new leadership position. our pitching starting rotation,

juan jorge de la rosa are back. >> looked great last year. everybody thought you were the sleeper and you ended up sleeping. >> it's kind of like the stock market. past performance is not necessarily a guarantee of future. but injuries. we also added one of our bombers in our 20 year history and he now is our hitting coach tutoring and mentoring carlos gonzalez and tu lowitzki, i thik we are ready for a great season. >> can i ask you about baseball economics, do you think they have it figured outs with luxury sharing. you're in a division with dodgers who look like they discovered their checkbook. do you think it's okay, status quo we have competitiveness across the league?

>> the industry is doing well. part of it is the affordability of our tickets in baseball opposed to other sports. more than that, the ability of teams to continue to compete. in that context, you look 20 years ago, when we became an expansion team with the national league, the revenues were 1$1.5 billion. we set records last year, $7.5 billion. yes, while there's revenue sharing, it is economic development for the areas, the communities and cities where we operate, so it's not just about baseball teams. we continue to do well. >> thank you so much for joining us. a great pleasure having you on. >> likewise. >> linda alvarado, alvarado construction. a sneak peek in the green room, packed this morning. they regularly talk on conference calls with the white house, consulting with the president on issues of vital economic performance.

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money i like. cigars i like. >> money managers, construction workers. >> your wife won't get mad at you smelling up the house and you can watch cnbc. >> cnbc suggests the game. you place your bets and you watch. if it was not here, i would not come. >> my dad said if you want to be in business you have to play the man's game. >> i am in american business. i watch cnbc. welcome back to "squawk." let's thank our guest hosts. thank you for a great hour. we have a very special squawkbox summit coming up. three men all called upon by the white house for all things business and the economy.

altman, efron and cody. they're all standing there -- >> three amigos. >> in a huddle there. on squawk. we will talk to them when we return. come on, nowadays lots of people go by themselves. no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey! ♪ [ howls ] ♪

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this is a special squawk summit. for the next hour, the issues of economic growth and business leaders. roger alton, blair efron of summer view partners and honeywell ceo david cody tackling the economic issues that matter most to your money. it starts right now, only on "squawk box." >> good morning.

welcome to "squawk box" here on cnbc. i'm andrew sorkin. becky and joe are out. we're thrilled to have a great cast of characters at the table. let's check out futures. looks like the dow will open a little higher. not too much. s&p 500 up marginally in the nasdaq. we're thrilled to have three well respected voices with us, blair efron, david cody and roger altman are very important men with business day jobs. they're also frequently called upon by the white house to weigh in on issues to the debt threat to jobs and the economy today. and they and twelve other ceos met with the white house and the president and including arnie sorenson. his thoughts. >> the general sense from the business community was to encourage him to continue to pursue a larger fiscal deal to

make sure we have the budget deficit on a sustainable track particularly on focus of spending and entitlement reform and acknowledgement there will be revenue pieces. >> and also discussing immigration. here's the ceo of deloitte. >> it's a talent play, right, about people becoming employed and becoming productive. it doesn't matter what level they're at. people here trying to earn a path to citizenship and in our colleges and universities and retooling american students to pursue degrees, they all contribute to the economy, not just the professional services. >> our three weigh in on the issues. first the headlines. >> we are keeping an eye on hewlett-packard. a course says they plan to keep all their businesses together also hp has no official comment. digital news site quarts had said they're considering a possible breakup scenario.

and a brief breach by hackers. no critical functions were disrupted by the incident and the vulnerability has been fixed but the group that hacked it said it hacked 4,000 bank executives and a $4 million fine will be levied for the libor rigging scandal and they're in late settlement talks with the uk and u.s. and disney posting better than expected earnings and revenues after the bell yesterday and the company says it expects to be a better layup of attendance at its films and theme parks. and we were at its "closing bell." >> you have a lot of ins and outs. basically trends were good. strong domestic results at our

parks, advertising okay and generally speaking, our business performed well and our int interactive media group was profitable for the first quarter and the first time the group has been profitable since we have been breaking it out. >> that part of the news really getting a lot of talk. shares rising on the news late yesterday. >> steve, right now, futures are indica indicating a sell-off and this morning suggesting we will see a roughly flat open. maybe we will have the board and maybe not. there it is, s&p relatively flat. dow jones, 9 higher. crude is lower by 60 cents, brent lower by 26 cents. and the 10 year higher b an eighth of a point. dollar, a lot of movement, 34 month low. head of the central bank out of a job three weeks earlier than expected leading to higher

expect expected aggressive moves by the central bank of japan. 93 and talk of going 100 at this point, the euro will cost you a buck 35. euro lower by a buck 40. andrew. businessmen who have the ear of the obama administration and participate on calls of the white house about economic challenges and offer solutions for the nation. blair efron, partner and co-founder. he's a lot of things. david cody, chairman and ceo of honeywell international and finally roger altman, former deputy secretary under president clinton. let's talk with buzz words we hear again and again, a balanced approach to balance and spend. people have their own views what balanced and fair means. you spend time talking to people

inside the white house. what does that mean in practice? >> you go back over the past year, the word balance has really meant what is the long way to get long term fiscal debt reduction and fiscal responsibility between revenue and spending cuts. i think today that discussion of balance has actually migrated to one of also timing, the idea of what is good for the short term to get the recovery on track versus what is good for the long term, in terms of getting obviously debt to gdp to a manageable level. from my perspective, a balance today says recognizing that government has an important part, in terms of the short term keeping the recovery going. you saw last quarter, gdp flat. why? the biggest component of that, government spending, down a point and half. >> why don't we see then the obama administration take an

approach, we're not going to do anything this second, 10 years out it will be back loaded and here is the plan and it will address this issue. even though you've heard that concept but haven't seen it in practice. >> when you use the phrase "10 years out," the markets and private sector, that wouldn't mean much. you have to do it in a way that's real. short term, a year or two, one thing, after that, you have to show important and meaningful reductions in the fiscal situation. that said, i do think the administration and you saw it renewed yesterday, is looking forward to trying to have a discussion. >> do you think the discussion is real? i'll ask david. you've been more involved. i imagine with you, it may be real. no. you talk to a lot of business executives who get invited to the white house and calls and invited some for the first time, more recently in the past couple of months, the white house seems like it's trying to extend an olive branch and they're not

sure because i heard different responses afterwards whether it's just -- >> for show. >> for show. maybe the polite way to put it. >> at the end of the day, there's no one guy who can do anything down there generally. you have 536 independent contractors. even though it sounds simplistic, they need to work together to get something done. the president can say something and congress needs to be there also. in a lot of discussions, they all any it's taxes and entitlement reform. both those things need to happen. if the sequester happens there won't be much done on the discretionary side. they all know it's what needs to happen but scared to talk about it. >> they all know the taxes need to be done, does the president believe in entitlement reform based on your discussions with him? >> i would say, yes, from what i heard. he understands. you're not going to have entitleme

entitlements for the future. >> they get fixed how? >> that's what nobody wants to talk about. >> everybody is hoping nor a grand bargain. i argued let's do little pieces. the administration proposed change cpi, a different way of calculating the benefits. i think the republicans favor that. why can't they do simple things or should they wait until they can do the whole enchilada one way or the other. >> let me make three points. first, i don't think the outreach to the business community the business administration has been doing since the election is for show. i think they're very serious about it and important to them. number two, more deficit reduction is occurring than most people see or grasp because between the budget control act number one and revenue deal, to avert the fiscal cliff number two and sequester, there's $3 trillion of deficit reduction on

the books by law -- >> over a 10 year period. >> over a 10 year period. simpson-bowles a little more than two years ago called for 4 1/2 trillion and two-thirds of what simpson called for is now occurring by law. third, as we often see, theory, macroeconomic theory and politics are at odds with each other. >> really? >> what a surprise. theoretically, you would not want the 1 percent fiscal drag deficit occurring this year is imposing on the economy. you wouldn't want that right now. we can all see we're growing 1.5 to 2%, quite week not enough for major markets. you would back end load this. the politics don't permit that right now and the big fight that will occur starting yesterday is the sequester. >> even if you're growing at 4%

or 5%, you would say, why on earth would you want to pull things back right now? they're going so well. there's never ever a time you want to cut spending. >> every 50 basis points of growth brings down your debt to gdp 4 or 5 points in the aggregate in the long term. the impact is dramatic before you think about positive impact on payroll. >> when it comes to cutting spending, there's never a moment when congress wants to do it, when things are good or things are bad. >> i'm with you on that one. i don't completely agree on the 4 trillion, 3 trillion, i would say that 4 trillion was off a different baseline and baselines change a lot down there. stuff we take for granted in business, a set of numbers. that's a whole different game. the cbo issued a set of numbers even if you let the sequester happen it's still 78, 77% debt

of gdp. you're right. neither one of them wants to talk about entitlement reform other than very generally and say it's important to do. as soon as you say what, beyond cpi, you have a tough answer. neither party needs to be the guy to move. >> there also seems to be -- >> there's no money. >> there's no money. psychologically you need to do it but there ae's no money ther. if you took it to $250,000, everybody like, that's $30 billion. >> the concept of the individual when you do means testing. >> it has an impact. psychologically, it's important to do. >> i'm surprised they haven't gone after means testing given the way the administration has gone after other issues. >> hold on, everybody. about two weeks before the fiscal cliff, the president put forward a plan hof approximatel

$2 million of entitlement cuts and revenue only, $620 billion over 10 years. now, if you listen to a white house spokesman talking yesterday afternoon, if there can be a revenue half to a short term deal, they will put that package or most of it back on the table. i think the bottom line is that the president's proposal of mid december on entitlement reform, entitlement cuts is still on the table if the republicans would join the issue on the revenue side. right now, i don't think that's likely. >> they feel like revenue is done. >> that's obvious. >> is it? >> what's clear is they walked away from a -- >> according to the white house is it done? revenue is not done? >> not if they want entitlement. >> how much of the conversation is about growth versus entitlement reform? in the context of listening to the inauguration speech, i'm not

sure either was addressed in a meaningful way. >> the dialogue has switched to one of growth and why the white house is so focused on what sequestration does in 2013, 60 basis points. >> what about short term growth? >> there's enough underpinnings, i think all three of us will agree, good news in the economy, if you actually -- we talked about this before, had the spur to let the economy build on itself, you would get -- you would develop momentum. to your point earlier, the markets certainly are okay doing things incrementally. i don't think this notion of a grand bargain matters as much as having the mosaic. >> feels like we tried that forever. >> we're making progress. i for one am optimistic the progress we keep building on it pays off. i think the word "growth" is the underpinning of any of these

discussions. >> let's leave it there for the moment. we will slip in a quick break. when we return, their solutions for getting washington to rise above. in the next hour, two powerful investors will tell us what the conversation in washington means for their money and yours. jeff solomon and bill gross. stay tuned, please. >> comments and questions, send them to cnbc and on twitter.

welcome back to "squawk box." right now, futures are sugge suggesting a low open. the mortgage applications rose 3.4%. and up six basis points, 3.7%. among the earnings that have come insofar, timewarner reported fourth quarter profits of $1.17 a share, above estimates. and timewarner at just under 29

cents per share. cvs, four cents above estimates and raising its guidance for the full year seeing higher pharmacy revenue due to new clients and higher drug costs. more than 19% over last year. let's continue our exclusive discussion on the set. >> why are you looking at me? go to steve. steve has a question. >> let's look at growth, a couple things we could do that would dramatically improve the u.s. growth prospects. first of all, roger, before we begin that conversation, is america in a permanent 2% growth world or is 3% a reasonable achievable prospect? >> no, in my opinion we are not in a 2% growth mold, if you look

beyond 2013, i think you can see a scenario we do a lot better than that on growth because of housing, manufacture and gas, housing and revived consumer and the odds we get to 3% plus, 2014, 2015, 2016 are better. >> is that part of your corporate planning? >> we plan conservatively. i thought you end up with a better outcome. >> you have to have flexibility. you never go into it saying here's my number. by the same token, if you plan for this kind of sales number and put costs into that, it's a heck of a lot tougher to take costs out. i have concern about the debt and drag that puts on the economy. there are two things they could do that would help that and help revive growth, a more aggressive energy policy. a huge amount.

the chamber sponsored a study saying there could be 2.5 and more trillion dollars to add to that revenue and the other a million jobs and then embraci immigration. i like seeing both parties working task force that and we need more people working to support that. >> on energy, do you feel the white house gets it and wants to do it or do you think the precious of environmental issues will prevent that from happening? >> all true, everything you just said. >> i want to get to health care. >> if i could just say, i think the main point on energy, right now, it's happening. there is a breathtaking turn around in natural gas and oil production occurring in the united states, a revolutionary turnaround. it's happening. we're on track, as you've read, to surpass saudi arabia, as the world's largest oil producer and

by 2025, will be oil self-sufficient and theoretically the united states will never import another barrel of oil. >> you think that will happen without any intervention and status quo. >> we could make it even bigger. if we leave it alone, it won't be bad but make it bigger if we allow drilling. >> this dramatic turnaround is based on current policy and current law. i think the white house myself appreciates it and wants to see it. >> in fact, andrew, a 10% reduction in oil dependency in 10 years, something the president highlighted in his speech and to your question on growth, i am where roger is 3% economy in 2014 and beyond i believe doable and i think you would add in 2013 but for the point and a half drag. >> you see 3% growth coming?

>> i'm not going to plan that way. >> don't you understand your planning for it can make it so? >> i do. >> a guy like you can -- >> if everybody else does it and you don't -- >> getting clearing the understood brush of a lot of policy issues in washington and lettinging letti letting us get to sure footing is the cheapest stimulus we could have. >> i have more on health care. >> more this morning plus the stocks already on the move. don't move. we'll be right back. time now for today's aflac trivia question. in which year did janet jackson's famous wardrobe malfunction occur at the super bowl. the answer when cnbc's "squawk box" continues. surgery was successful, but he will be in a cast until it is fully healed, possibly several months.

so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at getwellduck.com. no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey! ♪ [ howls ]

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to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location. today, ceo ron johnson talks about making his company one of the most talked about retailers of the year. "squawk box," cnbc. now, the answer to today's trivia question. in which year did janet jackson's famous wardrobe malfunction occur at the super bowl? the answer, 2004. >> nobody at this table got that

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welcome back to "squawk box." in the headlines this morning, apple may be about to lose its trademark for the iphone name in brazil. sources say a court will rule against them next week. a brazilian electronics maker filed for the name in 2000, seven years before apple introduced the device. and biogen idec will pay $4 member for the best selling drug, tysabri and will receive full rights to the drug. investors betting on more aggressive monetary easing due

to personnel changes in the bark of america's board of governors. >> let's look at the markets future and see how it's setting itself up for the day. dow looks like off 4 points and dow gones off about -- dow jones off about five points and nasdaq off five points. >> we have blair efron, david altman and roger. i feel like the president was fighting the first four years to keep the health care in place universal coverage. i think that battle is now over with. can he now say, let's iron this thing out and look at ways this health care law perhaps prohibits job formation and see if we can tweak it in a way that is amenable. is that a crazy idea? >> i think that is going to

happen. we still don't exactly know what it is. >> about time. >> for example exchanges. it could be interesting but haven't started. we don't know what it is. that whole process, there will be an evolution, sort out what works, what doesn't, how do you make it happen, what kills jobs and shouldn't. >> roger can the president do that and is it possible to do that? >> i think it's possible to do that. one of the things encouraging revealed in yesterday's congressional budget office report the rate of inflation in health care costs is running below expectations. you saw it's expected to be $200 billion a year below previous forecasts. have heard people attribute that some what to obama-care. >> other factors, a whole school of thought about behavioral changes. >> what about the entitlement -- >> no, it doesn't. >> whether the white house is going to use that as excuse --

>> a different question. >> a voiding. >> whether this administration will use that as excuse not to push for more aggressive entitlement reform. >> the administration already put it on the table to negotiate $400 billion in medicare. >> i think what roger said earlier, a spokesman yesterday said that number could be back on the table with the revenue they wanted additional $600 billion, they wanted 1.2 trillion on revenue and got 650. is there a way to do a detante when he business and the administration to the health care issue. >> i wouldn't use that word because -- >> it supposes a war ahead of time. >> opposed to an ongoing discussion and dialogue h how -- as explain in 13 and 14, the best ways to do it. the administration has said all along there are elements that

will unfold in how they come into practice with a timetable on exchanges based on best information from the business communi community. an ongoing conversation we are actually having. >> there are people who sit at this thabl in those seats. andrew, what's the right word? >> apoplectic. >> of the impact of obama-care on the job creation in this country. i'm not judging whether or not you're right or wrong but there's a sense out there. >> to seen see small companies -- >> to raise the cost of what it is to hire an employee, you will hire less of them. >> you are seeing small companies starting to talk about, i have 100 employees, do i break up into three llcs. you are going to have to deal with that sort of thing. that is going to happen and there are people that will be upset about know it. >> the other thing that makes people apoplectic, you kcan cac about health care and spending

decelerating. the bottom line was about cost containment. it really wasn't, about coverage. when you look at the amount of me on the government will spend on health care the next ten years, it is higher on obama-care than otherwise. the cost of spending will go up. >> the cost of spending for the government. >> that was the mission. >> i apologize. i have breaking news with government spending. the post office. this is breaking news. the post office says it plans to stop delivering mail on saturdays. 92 there you go. >> there it is right there. they are going to still deliver packages six days a week. no nail mail on saturdays. this will affect a lot of people. >> what will it save. >> they say it will save $2 billion annually. this is just crossing the tape of the associated press. there will be no saturday service.

i've automatlways enjoyed going mailbox on saturday and getting mail. this is huge. >> no need for entitlement reform or tax reform. >> take it away right there. i know we're having an important discussion on what to do. >> i want to know why you have nothing better to do on saturday. >> he wants the j. crew. >> i think we should go to three days a week on mail, as far as i'm concerned. i'm not getting anything in my mail that matters as well. >> just bills. >> how about entitlements, do you want to talk about that, too? >> we should. you want to go back to entitleme entitlements? >> i think we're there. what i want to know is what we're talking about with michelle, if you reduce the amount the government is paying either way, isn't the real question how much we spend as a society on our -- >> yes. >> and the question is how we

spend it. >> the more the government spends the more you incentivize people to not take control of their own lives. when you shift just a little bit back to the individual, all the decision making changes and the cost curve bends naturally instead of having somebody else make a decision in a far away place. >> just for the record, i don't agree with the point you made a minute ago, which is -- >> government spending goes higher in the next 10 year under obama-care. >> it will ultimately be high sneer in the second 10 years, almost 20 years. >> i think there are a lot of changes occurring, behavioral changes coming out of the great recession and labor market disaster that was causing health care inflation, not just government spending broadly to be lower. that may continue and we may see both government expenditures and societal expending will be low sneer people don't have access

to their health insurance. >> people are deferring elective procedures. i'm a trustee at a major hospital in new york. i think blair is, too. you see the data in terms of outpatient elective procedures, out-patient visits so forth. we'll see if that lasts but it may. >> i don't want to put you on the spot. you told me about your company the incentives you put in to encourage people to make the right decisions on elective health care. >> we've done a number of things. i'm not sure whether we know yet whether the health care act will work. we're encouraged because wee see see -- we see a lower inflation rate. the unmeasured impact is a lot of us have gone to higher deductible plans and that had a huge impact on people's behavior address i addressing it's my money now. if i don't spend it i get to

keep some of this. we're seeing very different behaviors driven by that also. i don't think we know that. >> for one year under g.e., everybody got 1,000 bucks to spend as they wanted to. the minute you gave that $1,000 to the individual all the choices changed and decision making, especially if you could hold it- >> most companies have seen a big impact and seeing a big shift towards high deductible plans also. >> can we talk about immigration? >> sure. >> is that an issue? >> we brought it up earlier. a number agree this is an important dynamic in growth and economy. >> i want to know when it's happening. >> it's happening now and just not legal. >> this shows you how the political process works. when it's clear there are votes on the line and the number of votes are on the line the sides come together and make stuff happen. if we can get the same thing going with deficit and health care and other stuff. >> immigration hasn't happened

yet. >> it's clear now. >> it could happen in 2013. >> it should happen in 2013. >> whether or not a quote path to citizenship unquote can pass the house or not and these related issues of do you first secure the border before you move toward a path to citizenship or can you do it assignme assignmently? these are the key issues. it isn't entirely clear whether it's a bill that can pass the senate and might pass the house. the most encouraging thing there is a bipartisan approach taken by this. the bipartisan group in the senate put forward a proposal and the president endorsing that proposal, this is encouraging stuff. >> we have to get these guys on stocks. we laid the economy in washington and next to the markets. >> we have two bankers and talk about deals. a lot to be done. >> deals, stocks. >> how about a deal for the post

office. this post office thing will affect all sorts of companies. >> you're really -- >> you're acting as if it doesn't matter -- >> credit card options. >> i won't be able to get a zero percent discover card on saturday. i'll get it monday or friday. >> in some locations, how do you get the "wall street journal" on saturday? >> they have delivery people. >> in new york city they do. in some places they use the mail. there's a lot of industries that will be impacted by this. this is a huge business story but we can talk about that later. >> i'm going with andrew on this. he's a good reporter? more on the growth of the american economy. at the top of the hour, the libor rate bigging scandal. more info from bartchilder. follow us on twitter, cnbc and

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welcome back to the special

squawk summit. here now, andrew ross sorkin. >> welcome back to "squawk." the futures at this hour. a little bit of mixed picture. no longer mixed picture. all red arrows across the board. let's get you through some of the morning headlines. financing plans for the multi-billion dollar acquisition of british cable group virgin media this morning, liberty global announcing a bond plan to acquire it with $3.4 billion in stock and cash and the president will join the "fast money" "halftime report" at 12:00 eastern time. going back to the postal service, the companies will be impacted. no service on saturday for those waking up, who will be impacted? >> netflix. >> netflix. >> there you go. >> you bring up netflix, is there premarket trading in

netflix? >> i don't know. >> medium do want to watch movies on saturday. >> andrew, you win this argument. >> thank you. >> can we talk about -- >> our distinguished panel who all speak with the whous onite on a frequent basis. >> i want to talk about the dreamliner. you guys are big in avionics. my question is do you think what's ed, gone on many years, delayed technical problems, will this prohibit future airplane development? >> you have to say it's not a good phenomenon for it. we still don't know the root cause of all this, still a lot of work left to be done. i fully expect regulators and additional steps for any type of aircraft development. yeah. >> does it affect your bottom line at all? a matter of orders for you?

>> there's never one platform so significant for us if it goes off the radar creates a problem. i'm not that worried as far as impact on us. >> talk about deal making, two leading deal-makers at the table. all three of you are deal makers. >> i just buy stuff and these guys do it all the time. >> and get a big commission. >> we saw the big dell deal yesterday. your firm worked as 45adviser. either of you, do you expect to see more buyouts, but similar buyouts as a result of this transaction. >> i wouldn't use it as a result of this transaction. i would say there are more buyouts because the financing markets are more buoyant in terms of letting size happen. absolutely. there are enough firms thinking of things in a serious manner right now the activity in the next coming months will be quite

a higher than 2012. >> more on the strategic side, trying to buy each other? >> trach side will stay busy. i think on the equity side and buyout side the idea a 1 to $3 billion zone of transaction size was a sweet spot for a deal of size, that's going up. >> there were specifics about dell, had a lot of cash on the balance sheet, a partner with a lot of money. >> you don't think you see those deals tat all. >> a lot of cash. >> much larger than normal and they're bringing it back from overseas to do it. >> during the fourth quarter of last year we saw turnaround in transactions and volume, fourth quarter over fourth quarter was up after the first 12 months of 2012 were down.

had we been having this conversation a year ago most of us would say 2012 was a good year in terms of transaction volume and now it turned into a tepid year. now, elements seem to be in place for up year strategic, all over the world and the u.s. we'll see whether it plays out that way, i think it will. as to whether there will be a rash of public to private transacti transactions to dell, i don't think so. >> why not. >> volume including private equity will be higher. it's difficult to do transactions like that, difficult to find companies that would like to go private. there aren't that many of them. values have improved with the rice rise of ecfy markets and hard to

find deep value. will there be others? yes. but a sudden search, i doubt it. >> does it say anything about the confidence in the board room and economy and people do deals when things are good and probably should be doing them when they're bad. >> boards gen rerally are more confident. your point of leading to a rash of deals, it's been a long time since a transaction, corporate to corporate specter or private equity deal led to a follow-up of deals. most things we see transformative are runoffs. and the idea of one piece heating to another becomes more difficult from revenue perspective. and from the board room comment, i think there's a level of

discipline that indicates sobriety in the transaction to think about. they're discussed a lot but you really have to get several metrics handled, both financial, strategic short term and long term for a board to say, yes, this is what we want to do. >> dow 14,000, does it feel there is a way to run? >> way to run is strong. does the market feel toppy, it is with respective to historic norms, september 11&p this year level of confidence generally and a sense of everything we talked about earlier, we are making progress and if you look at the markets the past two years, macros. siness?he down at 14,000 in your

>> one thing i do know, honeywell is underswrauld througho -- undervalued throughout. that part i am confident about. we don't think of dow 14,000. >> the market is at an all time high. do you feel like its an all time high in your business? >> no. we still feel things are being held back. >> you look where it should be. >> right. that feels to me like there's more room. >> it shouldn't feel like 14,000. >> our earnings are. >> it is not at an all time high in cost of dollars. >> very good point. >> it actually is not at an all time high. >> and the investors haven't gott gotten their money back after it diluted. >> in the whole sectors have continued to trade pretty poorly. i'm not a market forecaster but

i don't think the market feels toppy. >> 30 second, clash of the titans, murdoch and malone, this liberty deal. do you have a view? >> i do but i'm not going to share it. >> are you involved? >> next question. >> i had to try. thank you for being here. we appreciate it. >> that was like a warren sapp kind of response. next question. >> and frequent discussions with the white house, all three and we we had them all hawaiion at same time. >> up next, we'll tell you the names on the move ahead of the opening bell next. (announcer) at scottrade, our clients trade and invest

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let's take a look at stocks on the move. this company is taking control of this drug from elan for control of tysabri. timewarner earned 1.$1.17 a sha. cable network growth off-set declines in film, tv and publishing. coming up the next hour, the bull run in equities, we will talk to pimco, and the bond king. and paying big for then role in the rate rigging scandal. that and more as cnbc begins in just two minutes. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second.

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flyby. >> negative, ghost rider. the pattern is full. >> which cities will feel the pain most. >> and rbs, the latest bank to be punished in the libor rate rigging scandal. we'll talk to bart chilldon, third hour of "squawk box" begins right now. squawkbox, cnbc, first in business worldwide. i'm here with michelle and joe. becky and kernen are off today. the market is off. after monday's steep decline, we have a big layineup to talk abo the rally. on set, doug duncan, the chief economist at fannie mae and richard bernstein ceo of richard

bernstein advisors and cnbc contributor. we will talk markets with jeffrey solomon and the market master bond king, pimco's bill gross. we start the hour with the latest developments in the libor rate rigging scandal, rbs, the latest to be fined for its role in interest rates. bill chilton will be joining us but first the headlines. >> thank you. disney posting better than expected revenues after the bell and disney expects to do better with a growing luineup of films and theme parks. >> you had a lot of ins and outs but basically good. strong results at our economic parks. advertising okay, and generally

speaking our business performed well and our interactive media group was profitable for the fourth quarter, the first time it's been profitable since we've been breaking it out. >> more definitement men on sta saying this market is a wildly spinning top which is going to end badly. the correspondence was made public yesterday and provides a glimpse at what the justice department says fraudulently dire ratings with consequences for the economy. signed, sealed, but not deliver. the postal service not delivering mail. it will continue to deliver packages, no regular mail on saturday. andrew will live without the j. crew catalog. cuts to start in august and will

result in cost savings $2 billion a year. >> before everyone gives me a hard time, this is a big deal to media companies. if you're a subscriber to baron's, you have to get it on your ipad. >> tragedy. >> netflix. >> it is also delivered by -- >> barons is dhifrd by hand. all i'm suggest iing there are going to be impacts to various businesses. i haven't looked at the stocks, fedex and u.p.s., will they get more business because of this. the post office will deliver packages on saturday but maybe you deliver it elsewhere. >> they're the only ones who deliver on sunday and christmas. >> if there's an opportunity to change this, i think three weeks prior to christmas, you get

christmas cards, a fun thing for the family, they should have delivery around saturday. i think there should be an exemption for december. what do you think? >> i think it's a good idea. >> i'm getting no takers. >> i wish i cared more. >> we favor santa claus. i just get junk mail. i don't get real mail. nobody likes me. >> lots off businesses could be impacted. >> because your unread junk mail won't get to you. >> you wonder if saturday is a good day to get junk mail because you might act on it. snow somebody is going to write in and tell me i completely missed the story and there's huge impacts, and you're right. i don't see it. >> you're the economist. >> it's called negative delta g.

the change is negative the changes we put into delivery of mail ends up being negative for gdp relative to some positives out there. i'm just telling you. we'll get to richard. the royal bank of scotland is the latest settle libor charges. it will pay $627 million to put the matter to rest. here with the commissioner of the commodities of future trading commission, bart chil d chilldon and already named cnbc contributor. and we have been provided some e-mails as parent of the investigation. here is an e-mail may 24, 2008. please can we get a super high,

and super low six month libor rate, pretty please in caps and lib libor trader saying 41 and 51? and the trader, if you did that, i would love you finish ever. this is a pretty big settlement here. >> we can go back to the top. >> it was racy. >> we'll go back in a second. do it now. primary submitter saying 41 and 55. frank said, if you did that, we would come over there and make love to you, your choice. primary submitter, 41 to 51, it is. >> gross. valentine's day. >> let's bring in bart childon. $620 billion, a big settlement. will it clean up the libor mess?

>> i hope it's more than just libor, a message to the final sector. they need to clean up their act and there needs to be a culture shift. as you're reading, it was brazen and flagrant, even after we had been talking to some of the people at rbs, they continued to do this. there's even e-mail exchanges where they say the feds are on us. another person says, no, they're just interested in the dollar of lie bo libor, not interested in the yen. they continued to do this acting like they're flying above the law in an arrogant fashion. >> if you can bring up the 2010 one that bart was talking about, an interesting e-mail that shows they continued to do this in the middle of the investigation going on. interesting bart, yen trader 1.

at the moment the feds are all over on us about libor. that's for any us dollar? yes. don't think any one cares about the jpy libor. >> i will walk over. >> they were in the same area, one of the problems with this b rbs circumstance, for a long time, the traders, the people supposed to give the information to the libor submitters, they were sitting in in the same area. they would walk over to them. what we did in the ubs and barklclay's kiscases we assurede are firewalls between these. >> who's getting fired? bob diamond lost his job. is the ceo of ubs going to lose

the job? the new fellow, anthony jenkins at barclays actually said some pretty astounding things. i hope others take note. anthony jenkins apt barkley said we sacrificed short term profits for our overall values and reputation. even the new head of investment banking at ubs has said some similar things, how they were too arrogant and self-convinced. it's that sort of message i hope everyone takes on. >> who's the victim here? >> everybody in the market. when somebody has a false rate, everybody pays the price, so you want the waits false. >> how? >> if rates are lower than they're supposed to be, people pay a price. if they're lower than what they're supposed to be, in theory some people get lower

interest rates. >> some people got away with it. >> i want to outline because this is wonky stuff. a lot of penal don't know what libor is, impacts the amount they pay on credit cards, loan, et cetera. >> yes. libor rates, whether yen or pound, they impact everybody in the world, everyone in the planet mursz -- purchases on credit. it's huge. >> i want to go back to who's losing their job. there's no answer on that. should bob diamond have lost his job? >> that was a decision by the board. >> that was a decision by regulators in the uk. >> you'd have to ask them. i know the board made a

decision, forced out. that's really not my role, andrew, my role is go after them. >> what does the libor process look now and how should it look a year from now. we haven't seen much movement of reformed process which seems to be a collection of people sending e-mails to each other. >> one of the good things, i called for this, a pleasant development. this was run by the british trade association, a trade association of bankers was in control of this, at least partial control. that's in the process of being transferred over to uk regulators. that's really where it should be. there shouldn't be profit motive by the people setting important benchmark rates. i hope that continues. by the way, there are other markets i hope it happens with in the u.s. >> there were some e-mails uncovered and some conversations

uncovered that during the crisis, people actually called the fed and said, you know, there's actually no libor trading happening right now and we're kind of making up the numbers. they kind of shrugged their shoulderers and said, okay. nobody seemed to care at that point. does that bother you? >> we've cared about it looking at it since 2008. >> in the middle of a crisis, is there any right answer when the thing doesn't exist? one bank is not lending to the other, is there no number. what do you do. they were making up numbers. >> right. there were live libor trades. >> the what should they have done instead? >> they should report accurate, report nothing if there's no transactions. if there aren't transactions you don't make them up in thin air. >> what would have happened to

the financial crisis at that point? wouldn't it have gotten worse? >> there was trading and these guys were reporting low numbers in order to make them look more solvent than they actually were and that's a very dangerous thing for the entire financial system. >> can eau claire fi how much the market was ultimately manipulated. clearly, people have tried to manipulate the market. a lot of bids were thrown out because they were too high or low. was the interest rate marked rigged? did it impact people on the other end? >> yes, andrew, it did. barclays, it didn't. they were putting in their submissions so high and low were thrown out how they create the average. have 16 banks and take the top eight and throw the others out.

barclays was thrown out because they were high and low. with ubs and rbs, their solutions were included and did manipulate it. we call it perfected manipulation. not only did they try to manipulate, they had a perfected manipulation. >> in the uk, the regulators were encouraging the banks to put in numbers because they didn't want to frighten the markets. >> do you have anything to say to those who say it's a confidence game based on leverage. what would have happened? a lot of those banks would have blown up. >> i don't know what you said to be true, not arguing it, don't know it to be true. if you're violating the law, it's a violation of the law and you should be punished, period. if a police officer tells you to drive 100 miles an hour, you shouldn't do it. the law is the law. that's why these penalties like this one over $600 million is so

important and sends a serious message, don't mess with market markets. >> i have to push back because the e-mails we read were guys manipulating libor for profit. >> i agree. they're in a crisis. >> a bid was submitted to show the bank was not -- >> fund itself. >> in the funding market. >> in this case -- >> but my point is when you go after this situation, right, and then you force, in the middle of a crisis a different outcome than you intended. this regulation is set to do a, b and c, at the moment the regulation doesn't work for you, what does the regulator do? looks the other way in the uk. >> perhaps they need circumstances unforeseen. steve is right. these guys were absolutely trying to make money on the trades themselves. they weren't as worried as other

ones, bark lays and ubs, not worried about the image of the bank. >> we have to go. there is a safety valve called the fed's discount window they could have gone. thanks for joining us an engaging us in this engaging debated. "politico" reporting tim geithner will join the council on foreign relations as a distinguished fellow. talking about where he would land. >> whether or not it would allow -- >> he has a desk now probably across the way from bob rubin joining us tomorrow in the 8:00 hour and we will talk about the new desk mates. >> and we will talk with ceo jeffrey solomon and pimco's bill gross about america's bond equities and credit trouble and don't miss an exclusive

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welcome back to "squawk box". let's take a look at futures. they have been down and a touch more down. 37 implied open on the dow and four points on the nasdaq. not carrying through with yesterday's rally. check out shares of ralph lauren. he earn ed $2.19 a share an-- $ share. and disposable stuff -- >> disney. >> and restaurants doing expect -- doing better than expected. >> the latest news out of washington, how will it impact your stocks. joining us, jeff solomon from

cowen and company. do you believe this rally? >> hard not to believe it. the fed chairman telling you you have to get out of fixed income for sure. i think a lot of people have done that if i have a latter bond portfolio and higher fixed income instruments rolling off, you're probably going to look for dividends on stocks. >> everybody looking to why this rally should fail, do you agree? >> we are relatively sanguine and have people in washington trying to solve problems. whether we get there is a different issue and whether it's a grand bargain or fingermental, that's the procession. when it happens, people will feel it's okay to buy equities. >> in our survey, 86% of participants said congress will raise the debt ceiling every time it is reached this year. is that the perception of the market right now?

>> i would say that's true. i don't think anybody wants to play brinksmanship. we saw what happened in 27 and what happened the end of the year. i don't think anybody wants to go back there. interestingly enough i think the markets have adjusted to that fact. ever rip time you run to the brink of the cliff and pull back, the markets get used to it. they have adjusted to the fact that could be a possibility and dealing with the fact it's not likely to occur. >> rich, you're very bullish. >> i'm very bullish. i don't think people have noticed the united states is a growth story. we're focused on emerging markets they're a growth story. it's so wrong, it's silly. the projected earnings growth rate, you're a small cap aficionado. i bet you don't know this. the projected growth on russell 2,000 is six times from growth markets. the u.s. is a success story. >> what are the numbers?

>> 17% versus 30%. >> in one year, 70% growth rate? >> in your head, you're saying that can't be right. people say, i trust the numbers from brazil, i trust the numbers from india but don't trust the numbers from russell 2000. >> why will the stocks in russell 2,000 make 70% more? >> they're sensitive to the economy, business getting better. listen to jeff immelt saying outsourcing is becoming an obsolete story, obsolete business model. companies are bringing manufacturing back to the united states and everybody talks about energy. >> if it's only half right, i like that number. >> you're the chief economist for fannie mae? >> yes. >> is housing going to support it. >> housing is on the growth path, we won't use the word robust but it is going to grow. we support the economy. we agree on debt ceiling in

terms of fiscal, that won't get breached. we're less certain about the continuing resolutions. we think there will be argument and sequestration a drag. >> we agree with that. >> from a growth perspective, a little more than 2%. housing is key. we see the manufacturing piece as positive, not necessarily on employment side because there's such great productivity in u.s. manufacturing and energy will add over time. there's definitely positives. still, this year, the fiscal issues -- >> i have to break in -- >> more breaking news. >> is this monopoly. >> from john harwood this morning, obama is set to nominate sally jewel extensiecu of rei equipment. >> that is so fitting. >> outdoor company for interior secretary. >> you were going to say something?

>> we are a big believer in long term growth, especially energy sector. we just bought dahlman rose an investment bank focused on the natural supply chain and think there's huge growth in the capital for small companies and energy sector in particular and think there's a cyclical bottom in energy and transportation stocks that could benefit from that. we're actually making a pretty big strategic bet in terms of our viewpoint where we think the market is going as a company. swe sequestration is at the top of everybody's mind. we have our aerospace defense conference this weekend, the big topic is why are defense multiples at all time lows? the answer is people can't move or do anything until we figure out exactly what's going on in the defense sector. >> one of the other things we see as a positive, the pickup in housing actually affects a lot of small business. >> sure. >> small business is the engine of job growth.

>> we will discuss it more. we have pimco's bill gross on why the american credit bubble is like a dying star next on "squawk."

welcome back on this wednesday morning in the headlines. saturday delivery of the mail is coming to an end.

the postal service is announcing about 10:00 a.m. this morning, saturday delivery of mail will end in august and worth packages will still be delivered six days a week. the savings of all this, about $2 billion. dow component home depot hiring about 1,000 workers for the busy spring, the number is 10,000 more than home depot hired last year at this time, 80,000 hired. and you can count those numbers for spring. a significant change for fans of classic board gaymon noply. significant for a lot of us. after a poll of the board games' fans, the iron token has been eliminated, gone and cat token added. >> you know what it shows you? >> what's that? >> it was mostly women who voted. >> the iron, the wheelbarrow and shoe were up for elimination.

hasboro says the vote was very close. >> women voted, hate ironing, like kitties. >> i don't know. we now know where tim geithner will work next at least part-time joining the council on foreign relations. cfr president richard haass say ing former secretary treasure tim geithner is joining cfr as a distinguished fellow and thrilled to have this leading practitioner and thinker in our midst. and andrew is a term member, young member. >> i am not a term member, thanks, andrew. >> term member, they kick you out after a while. >> you have to reapply when you're -- >> older. >> i was just going to say, if these guys are right, bernstein and dunkin and sol omon, what ae

the three of us going to do? we've done nothing but reporting on crisis for the last six years. do you know what you will do, michelle, if you don't have a european crisis? >> i don't know. >> what about you, andrew? is it time to quit? i think we need to rethink, i think if -- i come in, in the morning, is there an emergency memo from this agency or that? is there some part of the world aflame. >> that's why you should be so bullish because people are focused on crisis. for more on the bull rally we turn to pimco's bond king, joining us managing officer and director. hi, bill. >> hi, michelle. >> we can't find a bear among the group. i know you're the bond guy. if they're right about stocks, that means money comes out of

bonds and definitely affects you. >> they can. we're sort of a bull on the stock market as well, michelle. >> my gosh. not a two ear and one tail like in spain but perhaps one and it can go up 5 or 6% and already done that in the month of junior. that's a decent in the month of january. that's a bullish statement. pimco actually got $20 billion in january inflows opposed to out-flows, we're not seeing out-flows, seeing inflows. we think it came from money market funds and capital the gains and delayed dividend payments last year, et cetera. not from the bond market at the moment. >> is the bond market breaking right now, when we talk about the 10 year yield at 2%, we saw the sharp rise the last couple of weeks albeit off low levels, is this the beginning of the

great rotation? >> i think going back to last july in 2012, we saw the beginning of the bear market and long bonds. the 30 year bottomed at 2 1/2% and now at 3.20, about a 15% decline in terms of the long bond. what we suggest over that entire period of time, don't own long bonds, really the same thing when observers talk about the stock market being a market of stocks. the bear market is a market of bonds, if you can avoid long term bonds, buy something from mexico, italy, spain, higher yields and more protection relative to price, i think you have a chance to earn 3 to 4% in the bond market. >> this is rich bernstein. there has been an absolute flood of institutional investor money into short duration bond funds. isi has a bond manager survey

showing bond portfolio managers are habitually short duration versus benchmark. everybody is scared rates are going up. is there a risk of taking a position in short duration bonds now with a huge flood into those products? >> it's an opportunity. she shorter the duration and larger yield you get production and the reason they're going into it to a certain extent. pimco is shading it to a lower side but basically close to index. low duration vehicle is a bet interest rates go up and you earn 1 to 2% opposed to 3-4%. i think that's the greatest risk. >> i want to go back to equi equities, you some what famously wrote in august, equities are dying, boomers can't take a risk and gen x believes in facebook and the other has no money. have you changed your view?

>> i think that's true. we can speak to january on the great rotation, one month type of thing, typically money comes in in those markets. it's not a downer in terms of returns but a downer in terms of willingness in the ability and demographic influences and forces to present a change to stocks. we're seeing -- what we're going to see demographically, a lot of boomers getting older and older and frankly boomers like certainty, they like stability, they like a fixed income type of return. that's not pimco's definition. >> you don't think if the ecky market continuecky -- equity market continues at some point will say, i missed this train, i have to get on it. >> they will at the margin. let's face it they've been burned two or three times, by

dot-coms and layman aehman an - certain number have been burned and recommend they should come back with the stocks going up 5 or 10% but not what we saw 10 years ago. >> i want to be sure what we're saying. it is full of apocalyptic terms, death star and nova and leverage and takes $10 of debt to raise a dollar of gdp these days. sounds like you are very pessimistic and expecting really bad outcomes from reading that piece. is that your take on the world? >> not death star. death star is not in there. >> that's all i heard. i'm thinking of you as darth vader, bill. >> it was a metaphor and explained it in that way and said this was a metaphor for a super nova expansion of credit.

we've gone from $3 trillio worth of credit in the 70's to 56 trillion dollars of credit today, that's a huge expansion like a super nova explosion. a super nova expands and contracts and assumes itself with the margin over time. >> i missed the apock liq tick stuff. what do you say is going to happen because of the $26 trillion of debt and when it is going to happen? >> the influence of credit is less and less potent, anemic relative to what it was. like i did state it takes $20 of credit to generate one dollar of gdp. back in the '70s, it took $5. more and more credit is required to expand the economy, the same thing asking can you solve a debt crisis or solve a credit crisis with more debt? >> what is the outcome of this? what are you saying is going to happen as a result of the

exploding super nova and contraction. >> here's what happens at the marg margin, this credit expanse produced by lower interest rates has an effect on financial companies and financial business models in turn has effect on the real economy in terms of employment and layoffs. banks, their net interest mar n margins narrow, can't create more branches and layoff people, investment and insurance companies. any company that makes money with money is threatened at the margin. >> bill, a question, chief economist at fannie. >> are you still going for growth in the next 10 to 20 years? >> we didn't say 10 to 20 years, the next five years, the new normal. we think the 10% number in u.s., global growth 3 1/2%, zero percent in euroland is a number based upon structural headwinds,

d demographic, globalization, technology and high debt levels allbining to limit growth. >> you're willing to buy italy even though it looks like berlusconi will be running it again? >> we think italy has a good balance sheet, michelle. it has a balance of payments surplus and primary level relative to the united states. it has some things going for it. >> well, besides the pizza and pasta and food. good to see you. >> and primary surplus. >> that's true. they remind us all the time. thank you. appreciate it. >> thank you. coming up, disney beating expectations after the bell but the big buzz from the nerd community, "star wars." more on that. still ahead, why the grounded dreamliner has some cities in a costly holding pattern. phil lebeau joins us the bottom

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welcome back to "squawk box". disney beating the street with quarterly results and earnings and due to strong growth in its

media networks and theme parks. for the nerds out there, the news came during our interview with julia boorstin. >> we are working on stand alone films. working on films derived from great "star wars" characters that are not part of the overall saga, so we still plan to make ""star wars" 7," 8 and 9 roughly over a six year period of time starting in 2015 and a few other films released in that period of time, too. >> cannot wait. what does that mean? will we see teen wolf? can't wait to find out. up next, phil lebeau is life life -- live in the studio and tell us about the trimming down impact of beoeing's groom line sneer imagine you -- dreamliner. >> imagine you want a place in

japan and then told you can't have that for a while and it will cost you hundreds of thousands if not millions of dollar and we will talk about the dreamliner grounding when "squawk box" returns. this friday, "squawk box" hits the green. we are live from pebble beach and the at&t pro-am with special guest host, former yahoo! ceo and one of the most powerful women in business, carol barts, joins us for all three hours starting at 6:00 a.m. eastern time, only on cnbc. we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades

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welcome back. announcing canceling flights through the end of the month from ana. and they're not the only ones grounding. phil lebeau joins us with that story. >> the whole thing with the dreamliners, it connects mitt size cities with the world, tokyo, europe and the idea service can be expanded to a range of cities. take a look at some cities planned around service. what's happened. san jose, california, they started nonstop service to tokyo through ana, costing the region now since they've had to stop estimated $214,000 a day in lost business. this is an estimate. the airports are careful not to

give us exact numbers. next, san diego, california, japan airlines supposed to have nonstop service to tokyo. they've been putting a lot of time and effort in this. discount the landing fees and you don't have that service who knows how long. united, nonstop service, denver to tokyo, starting the end of marve, still saying we might hold out hope this will happen. nope. estimated impact 1$132 million annual revenue. >> that's big. >> that's huge. one last. houston, texas, flights to lagos, nigeria, london heathrow. >> that's all oil, houston going to lagos because of the oil industry. >> and it was cheaper to operate and mid-size cities that could afford to have them.

>> the 787 is not as large as the triple 7 extended range. as a result, if you fly a triple 7 the issue is not range, can you fill up all the seats. >> how many seats versus 787? depending what size, stretch model you're looking at another 50, 60 seats depending on the version. >> do we know anything more than we did a day ago or two weeks ago? >> bottom line, we don't know the rootcause. you can talk about, well, we have problems with the batteries and connecters. at the end of the day, they do not know the root cause. as long as they don't know the root cause, there's no timeline for -- how do you come up with a solution if you don't know exactly what's wrong? >> this is a system that's integral to the operation. if they decide to do something different with the batteries -- >> this is where you get the fuel efficiency from. >> onboard from batteries, not from oil and -- >> from the engines. >> do we know internally at

boeing, is there a contingency, where they're looking into nickel batteries? >> officially they will tell you no. unofficially, i can tell you there's at least been some discussions about it. where they're saying at least, this is a possibility. you don't want to go down that route if you're boeing -- >> the engineers are literally working 24 hours a day, not just working on fixing this current problem, but looking at other alternatives that are very different from the way -- >> i would imagine there are engineers looking at it. but my guess is right now, the priority is, that's way down the line. this is what they built the system around. >> get on this, phil. come on, lebeau. >> thank you, phil. two mad minutes with jim cramer. don't move. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily.

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jim and david joining us now. good morning, gentlemen. >> good morning. >> we could talk about the post office or disney. or we could talk about zynga. where do you want to go, jim? >> this story here is great to

have lucas films. but espn. look at 54 to 46. there was an absolute worry that espn was slowing down. it looks like espn is back to where we thought. some people are very comfortable paying up at these prices. the 53 level, 54 level that we had before was not sustainable if espn slowed down. but espn -- >> are you comfortable one day there's not going to be ala cart pricing, and espn will -- >> there will be ala carte -- >> yes. espn, whatever they want, they get right now. >> right now. >> why do people pay for espn? it's the only thing my kids watch on television. >> once they break the bundle apart, you have to buy espn separately and the rate would go up. >> you have to buy espn and cnbc. >> you'd be paying 30 bucks a month. >> it hasn't happened. the bundle sticks together.

that will always be a question as we see so many new services that will still be a question. but for now, sports is -- you can't dvr it. >> it works. >> david, your media is looking good right now, isn't it? >> it is. not to mention being able to use the netflixs of the world to get hundreds of millions -- >> well, no one's -- it's streaming, you know, remember how the younger generation uses it. and netflix was highlighted in the fall, very, very positively. to be short netflix. >> thank you. >> thank you. we're going to get the last word on the markets and the economy from doug duncan and richard bernstein when we come back. ♪

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